Financial Stability Plan
Our government officials are doing their best to face the current financial crisis. With the tightening financial market, the financial industry is not able to provide the necessary credit which historically has allowed new ideas to flourish. It has always been this entrepreneurial spirit which creates new jobs. With the down turn in the economy and loss of jobs we are seeing banks and other credit sources freeze up. This contributes and potentially accelerates our current recession.
The administration's Financial Stability Plan has been implemented to ensure that businesses with good ideas get the credit they need to expand, which will create new jobs. This allows working families to acquire affordable loans for new purchases which will, eventually, stimulate the economy into full recovery.
This plan will address the troubled assets and capital constraints of our financial institutions and prop up the floundering secondary market.
“We have put in place a series of financial initiatives, alongside the Recovery and Reinvestment Program, to help lay the financial foundation for economic recovery. We launched a broad program to stabilize the housing market by encouraging lower mortgage rates and making it easier for millions to refinance and avoid foreclosure. We established a new capital program to provide banks with a safeguard against a deeper recession. By providing confidence that banks will have a sufficient level of capital even if the outlook is worse than expected, more credit will be available to the economy at lower interest rates today -- making it less likely that the more negative economy they fear will take place.”
– Secretary Geithner, Wall Street Journal Op-Ed, 03/23/09
In order to protect the tax payer, each and every dollar in the plan is being directed toward economic revitalization. The Financial Stability Plan is leading us toward a new era of accountability, transparency and stricter conditions on the institutions receiving these funds. This strategy is designed to ensure the proper use of the public funds through setting conditions on lending as well as executive compensation and sets a new standard for enhanced reporting requirements.
The broad goals of the Administration seem to be:
- Restore our confidence in the US financial institutions
- Jump-start critical markets which finance American households and businesses
- Address the current housing market issues and foreclosure crises.
The Financial Stability Plan is to stabilized the American financial system by:
Capital Assistance Program
This program is to ensure that the banks have adequate capital even in a more adverse environment. It determines whether the banks need additional capital to continue lending and to absorb any potential loses that may occur if the economy weakens.
Consumer and Business Lending Initiative
This program is to be used to unfreeze the secondary credit markets, such as student loans and small business loans. This program could possibly unlock up to One-Trillion dollars of new lending and unfreeze the currently frozen credit markets.
Making Home Affordable Program
This program is set up to help families stay in their homes. This program will assist up to 5 million "responsible" families in making their mortgages affordable. It creates a 75 billion dollar loan modification program to help up to 4 million families stay in their homes. This program is also responsible for the guidelines be instituted to bring consistency to the home loan process.
Public-Private Investment Program
This program is addressing the challenge of legacy assets and was created in conjunction with the Federal Deposit Insurance Corporation (FDIC) as well as the Federal Reserve. This is just one effort our politicians have made to repair balance sheets throughout our financial system. As we know they need to assign a dollar value to the monies loaned. Once this is done, then the economy can truly begin to recover. |
